Marsh & McLennan Cos., the insurance broker accused by New York Attorney General Eliot Spitzer of rigging bids and taking kickbacks, plans to cut 3,000 jobs after profit plunged to a seven-year low.

The firings will reduce staff by 5% and save $400 million a year, the world’s largest insurance brokerage said. Third-quarter net income fell 94% after Marsh set aside $232 million for a possible settlement with Mr. Spitzer and collected fewer fees from insurers. Mr. Spitzer called the fees “payoffs,” and Marsh eliminated them after the quarter ended.

The job losses underscore the effect of a lawsuit Mr. Spitzer filed October 14, which wiped out 42% of Marsh’s market value and prompted the ouster of the company’s chief executive officer and three top brokerage executives.

Michael Cherkasky, 54, named CEO two weeks ago in place of Jeffrey Greenberg, is cutting costs and pursuing a settlement as he tries to retain clients.

“He’s certainly doing a lot of the things that need to be done,” said James Huguet, who manages $1.35 billion at Great Companies LLC and sold all the firm’s Marsh shares. “It’s an extremely serious and difficult situation. When your credibility is brought into question, as a professional services organization, that has a huge impact on your reputation.”

Mr. Spitzer accused New York-based Marsh of fabricating bids and steering clients to insurers that paid the most fees. Mr. Cherkasky said on a conference call that Marsh’s internal investigation would be 90% complete within 10 days and that he was “cautiously optimistic” bid-rigging was limited to “very few” people.

“We have now reviewed over 2 million e-mails, done dozens and dozens of interviews, and reviewed thousands of thousands of documents,” he said.

Cherkasky said Marsh hasn’t found evidence the company steered clients to insurers that paid it to arrange reinsurance contracts, a practice known as tying that Mr. Spitzer is also investigating. Still, Mr. Cherkasky split Marsh’s reinsurance unit, Guy Carpenter & Co., from the main brokerage. He also separated the Kroll Inc. investigations subsidiary from the brokerage.

Marsh shares fell 56 cents to $26.80 in New York Stock Exchange composite trading. They traded at $46.13 before Mr. Spitzer sued the company.

Third-quarter profit also included a $40 million charge to settle accusations by the Securities and Exchange Commission against Marsh’s Putnam Investments mutual-fund unit.

Fees from insurers, called contingent commissions, fell 74% to $46 million in the quarter. Marsh said some insurance companies have delayed payments and that the suit prevented it from calculating how much it was owed. Marsh intends to recover the fees and apply them toward a settlement with Mr. Spitzer.

“I’m not sure what they are waiting to be clarified,” Mr. Cherkasky said in an interview. “It’s pretty clear that they had a contract with us and we earned this money and I think they need to pay it.”

Marsh has identified $50 million in annual consulting fees, sponsorships, and facilities expenses to cut. Job reductions will cost Marsh $325 million to implement over the next six months, then save $350 million a year. About three-fourths of the cuts, or 2,250 positions, are in the company’s global brokerage unit.

Marsh shares have tumbled on expectations the company won’t be able to make up lost brokerage revenue, will lose clients, and may pay hundreds of millions of dollars in penalties and restitution. The company said the $232 million legal reserve was established as a “minimum potential liability.”

“We think it could be difficult to take out costs as quickly as management intends without potential implications” to revenue, said Fox-Pitt Kelton Inc. analyst Jon Balkind.

Three top brokerage executives besides Mr. Greenberg have already left. Mr. Cherkasky on Monday asked for the resignations of Roger Egan, president of the brokerage, and Chris Treanor, chief executive of Global Placement, where Mr. Spitzer said abuses occurred. Ray Groves stepped down as chairman and chief executive of the brokerage October 15.

General Counsel William Rosoff also stepped down Monday. Mr. Cherkasky said Mr. Rosoff will be replaced as soon as possible. Mr. Spitzer refused to negotiate with former CEO Mr. Greenberg, 53, who resigned October 25.

Earnings at Putnam Investments, Marsh’s mutual-fund unit, plunged 60% after settling SEC allegations it made undisclosed payments to securities brokers that promoted its funds. Putnam’s profit also fell as clients pulled $10.5 billion from the Boston based manager, increasing Putnam’s total outflow this year to $40.3 billion.

Third-quarter profit fell to $21 million, or 4 cents a share, from $357 million, or 65 cents, a year earlier. Marsh was forecast to earn 67 cents a share based on the average estimate of 16 analysts surveyed by Thomson Financial. Many analysts in the survey, including Deutsche Bank Securities Inc.’s Alain Karaoglan, didn’t include costs for a settlement.